Question

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current fiscal year:

Preferred 2% Stock, $75 par (100,000 shares authorized, 80,000 shares issued)	$6,000,000
Paid-In Capital in Excess of Par—Preferred Stock	420,000
Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued)	24,000,000
Paid-In Capital in Excess of Par—Common Stock	1,850,000
Retained Earnings	115,400,000

During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:

Jan.	5	Issued 400,000 shares of common stock at $11, receiving cash.
Feb.	10	Issued 5,000 shares of preferred 2% stock at $90.
Mar.	19	Purchased 150,000 shares of treasury stock for $10 per share.
May	16	Sold 80,000 shares of treasury stock for $13 per share.
Aug.	25	Sold 20,000 shares of treasury stock for $9 per share.
Dec.	6	Declared cash dividends of $1.50 per share on preferred stock and $0.06 per share on common stock.
	31	Paid the cash dividends.

Answer 1

Date	Account Titles and Explaination	Debit	Credit
05-Jan	Cash (4,00,000 shares X $11)	$ 44,00,000
	Common stock (4,00,000 X $8)		$   32,00,000
	Paid - in capital in excess of par - Common stock [($11-$8) X 4,00,000]		$   12,00,000
	(Being common stock issued)
10-Feb	Cash (5,000 shares X $90)	$   4,50,000
	Preferred stock (5,000 shares X $75)		$     3,75,000
	Paid - in capital in excess of par - Preferred stock [($90-$75) X 5,000]		$         75,000
	(Being preferred stock issued)
19-Mar	Treasury stock (1,50,000 shares X $10)	$ 15,00,000
	Cash		$   15,00,000
	(Being Treasury stockpurchased)
16-May	Cash (80,000 shares X $13)	$ 10,40,000
	Treasury stock (80,000 shares X $10)		$     8,00,000
	Paid - in - capital from sale of Treasury stock [($13-$10) X 80,000]		$     2,40,000
	(Being Treasury stock sold)
25-Aug	Cash (20,000 shares X $9)	$   1,80,000
	Paid - in - capital from sale of Treasury stock [($10-$9) X 20,000]	$       20,000
	Treasury stock (20,000 shares X $10)		$     2,00,000
	(Being Treasury stock sold)
06-Dec	Cash Dividends	$   3,28,500
	Cash Dividends Payable		$     3,28,500
	(Being Dividend due for payment recorded)
31-Dec	Cash Dividends Payable	$   3,28,500
	Cash		$     3,28,500
	(Being Dividend paid)
	Computation of Dividend:
	Total number of Common shares outstanding
	Shares issued	=	$   30,00,000
Add:	Additional stock issued	=	$     4,00,000
Less:	Treasury stock purchase	=	$   -1,50,000
Add:	Sale of Treasury stock	=	$         80,000
Add:	Sale of Treasury stock	=	$         20,000
	Common shares outstanding	=	$   33,50,000
	Dividend @ $0.06 per share
		=	33,50,000 X $0.06
		=	$     2,01,000
	Total number of Preferred shares outstanding
	Shares issued	=	80000
Add:	Additional stock issued	=	5000
	Preferred shares outstanding	=	$         85,000
	Dividend @ $1.50 per share
		=	85,000 X $1.50
		=	$     1,27,500
	Total Dividend Payable	=	$2,01,000 + $1,27,500
		=	$     3,28,500